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Intercompany Sales Intercompany sales processing consists of the following three stages:    Processing sales orders Processing deliveries


The sales organization and the plant are assigned to different company codes and have the following responsibilities: Sales organization: Processes the sales order Bills the customer Plant: Delivers goods to the customer Bills the ordering company code (sales organization) - this is intercompany billing. Intercompany billing uses SAP EDI to carry out posting to vendor account for the ordering company code. Company Structure Company code 0001 0002 Condition Record A condition record specifies that plant 0002 bills sales organization 0001 for goods at 80% of the net invoice value. Sales orders Sales organization 0001 receives the following sales order from customer XYZ: Item 10 Product A 20 pcs (Plant 0001) USD 200 Item 20 Product B 50 pcs (Plant 0002) USD 500 The second item requires intercompany sales processing, since product B must be delivered from a different company (company code 0002). Intercompany Sales Processing The intercompany sales functions are carried out as follows: o Pricing for customer invoice: Sales organization 0001 Sales organization 0001 Plant 0001 0002

The Sales and Distribution organizational structure is called the Sales Area. This article will review the organization structures necessary to support a global enterprise. It is the organizational structure that identifies the legal financial entity from a reporting perspective. but also the business processes that utilize these structures must be flexible enough to support your legal and business reporting requirements. The organization structures are represented in three functional areas: Financial. and then can be assigned relationships to other organizational structures. Sales and Distribution. we will focus on the Inter-company sales process. In particular. All business transactions that post to general ledger accounts do so at the company code level. Given that the competitive landscape for business is being expanded to a global playing field. pricing procedures. it is necessary to review the organizational structures in SAP ECC. This control data is defined in Customizing for Sales by your system administrator. see Conditions and Pricing. the distribution channel. Intercompany billing itself is controlled in a separate menu point in Customizing. as well as reviewing the sales processes that rely on these structures. The sales area is a combination of three individual organizational structures: the sales organization. The Financial organizational structure represented in SAP ECC is the Company Code. Not only must the appropriate organization structures be represented.o o delivery: Plant 0002 billing: Sales organization 0001 bills the customer for USD 500 Sales organization 0002 bills sales organization 0001 for USD 400 (with an intercompany billing document) o Financial accounting: In company code 0001. and access sequences. Organization Structures In order to establish the organization structures necessary to support global business processes. All postings to the general ledger from subsidiary applications are created automatically. and the division. SAP EDI is used to carry out posting to vendor account Relationship to Pricing The system processes intercompany pricing elements in exactly the same way as other pricing elements. A company code must be established for each country where financial transactions are to be reported. The data for intercompany sales is stored in condition records. Pricing for intercompany billing is controlled by condition types. the company code must be determined automatically in that application. it is increasingly necessary to represent and support the global organization in your Enterprise system. All allowable organizational structures must first be defined in customizing. The sales . and Logistics. Therefore. See also: Working with Intercompany Sales Orders Working with Intercompany Deliveries Working with Intercompany Billing For further information. It is the level of financial integration for all SAP business transactions. and relate them to your Enterprise.

It answers the question: How did we sell? Examples of distribution channels may be wholesale. and can be configured to be defaulted to the line item level of the sales order. which is issued to the customer. For each sales organization. It defines the customer’s rights of recourse for product liability. we may establish that. we are not allowed to source a sales order directly from a manufacturing facility. For example. Manufacturing “plants” only transfer inventory to distribution center “plants”. We first check the Customer Material Information master record. The delivering plant is stored on the shipping tab of the customer master. If so. inventory was sold that belonged to a different legal entity. For global enterprises. or a delivering plant is not found. This means different combinations of sales organizations and distribution channels can propose different delivering plants for the same sold to customer and material. distribution channel. We must configure allowable combinations of Sales organizations and Distribution channels that can sell from a specific plant. in general. after posting goods issue from the delivering plant. two billing documents need to be generated. If not found. not a recommendation or limitation of the SAP ECC system. it helps establish the pricing strategy for the sales document. the US Sales organizations for “domestic wholesale” distribution channels can sell from US plants that are distribution centers. if found. Although it represents where the inventory is located. It determines the company code that is used to financially record the reduction in the inventory General Ledger account. It answers the question: Who did the selling? In configuration. based on the combination of sales organization and distribution channel. The distribution channel identifies how our sales efforts reach our customers. The division identifies the product categories that we sell. The plant code is determined automatically for each sales order line. Inter-Company Sales The definition of inter-company sales in SAP ECC is when the company code that is determined by the delivering plant at goods issue time differs from the company code determined by the sales organization at billing time. If no Master record exists. Once again. different combinations of sales organizations and distribution channels can propose a different delivering plant for the same material. it is also checked to make sure we are allowed to sell from that plant based on the sales organization and distribution channel on the order. different sales areas can propose a different delivering plant for the same ship to customer. In essence. is used to record the revenue and accounts receivable in the company code that is related to . Therefore. you may define a separate distribution channel for international and domestic sales. The plant is related to the Company code in SAP ECC to determine financial ownership of the inventory. and the delivering plant is returned to the sales order line. Examples of plants can be distribution centers and manufacturing facilities. It represents the selling company’s legal responsibilities. In order to “balance the books”. The delivering plant on the Ship-to customer master is stored based on the sales area. In both cases. The sales organization is the highest level for reporting sales information. we proceed to the material master. it may be necessary to define multiple Plant codes to represent inventory that is stored in one physical location but owned by different Company codes. The delivering plant is stored on the material master. the search ends. while the US Sales organization for “international wholesale” distribution channels can sell from both Domestic and International Distribution channels located throughout the world. This record is stored based on the combination of sales organization. The first billing document. it can be used for product line sales reporting. and master data default data. This relationship is used at the time the goods issue is recorded. a sales organization is uniquely linked to one company code. If this record is found. and it can be used to determine default master data for the sales order. It answers the question: What did we sell? The division is a part of the sales area. and post the offset typically to the cost of goods sold account.area is used for capturing sales data. for example. and the delivering plant is returned to the sales order item. It is also a field that can be stored in the material master. and as such helps define reporting. the search is ended. sold-to customer and material. pricing. Once again. we continue to the Ship-to customer master. Therefore. When the delivering plant is determined. we will check to see if a delivering plant is stored in this record. retail and direct marketing. The plant code is also related to Sales organization structures. This is how the SAP ECC system determines the company code used to post general ledger accounts at billing time. The SAP ECC system uses a specific sequence of master records to default the delivering plant into the sales order item. This is merely an example of how to use the relationship of plant to sales organization and distribution channel. The Logistics structure necessary to support global business processes is the Plant. we configure the valid distribution channels that can be used. The Plant is the highest level in the Materials Management application and is used to track inventory.

The perspective is that the sales organization is “buying” the inventory from the delivering plant to support the sale. In other words. The reason different condition types are used is due to financial controlling. but not both. This enables cross company sales. which references the pricing data from condition type PI01. the sales area is determined based on the delivering plant. Company code A orders goods through its sales organization A from Plant B belonging to Company code B. In this billing document. internal customer and billing document type “IV”. It is imperative that both Plants A & B should have the material. which determines the cost form the material master. a condition type can be mapped as either revenue or cost. or cost. Sales organizations and plants assigned to each other need not belong to the same company code. as the cost on the customer invoice is actually the cost on the intercompany invoice. the billing document type is defaulted from the order type. In the customer. Therefore.the sales organization of the sales order. a plant belonging to Company code A & assigned to Sales Organization A can also be assigned to Sales Organization B of Company Code B. the company code related to the plant that provided the inventory bills the company code related to the sales organization that received “credit” for the sale. pricing procedure RVAA01 is provided. based on which sales organization is selling the product. It is defined at the level of the sales org and the delivering plant. Using the intercompany sales area. The cost on the intercompany invoice uses the standard condition type VPRS. In other terms. The sales area is determined from the sales order. the sales organization is providing the customer. The second billing document is used to record the “intercompany” sales. To put in simple terms. This allows flexibility in recording profitability for the sale to the customer. In the second invoice. The cost however. INTER COMPANY BILLING Definition: A company arranges direct delivery of the goods to the customer from the stocks of another company belonging to the same corporate group. The pricing procedure is determined using these influencing factors. is determined with an intercompany condition type PI01 “intercompany price”. This means that the same product can have a different intercompany price. the material is created for both the Plants A & B + their respective storage locations. That is. Let us review each billing document to see how they are used to post an intercompany sale. Revenue is posted using the standard pricing condition type PR00. Sales Organizations and Plants are uniquely assigned to Company codes. which is used to record the intercompany sale. and the delivering plant provides the sales area for the intercompany invoice. The intercompany invoice also defaults the billing document type from the sales order type. Pricing procedure ICAA01is determined. The revenue is posted using condition type IV01. Order type “OR” defaults billing document type “F2” in the standard system. Order type “OR” defaults billing document type “IV”. The payer customer is determined based on the sales organization of that sales area. a different pricing procedure is determined. PARTIES INVOLVED . Basically. It is logical that we use the same data as condition type PI01. The payer customer is defaulted from the sales order. It is not possible to assign either a plant or a sales organization to more than one company code. and which plant it is being delivered from.

Ordering Company Code: Which orders goods from Plant belonging to Supplying Company code through its sales organization and bills the end customer? Supplying Company Code: Supplies goods from its plant to the end customer specified by the ordering company code and bill the ordering company code. Hence. the system automatically picks up this internal customer number whenever there is Intercompany billing. We need to create customer master in Account Group .1) End Customer 2) Ordering Company code 3) Supplying Company Code. This internal customer number has to be assigned to the ordering sales organization.Sold to Party and maintain minimum required financial & Sales Area data. Define Internal Customer Number By Sales Organization: Menu Path: IMG/ SD / Billing/ Intercompany Billing/ Define Internal Customer Number By Sales Organization: Creating / Showing Ordering Sales Organization as Internal Customer for Supplying Company code: Transaction Code: XD01 The ordering sales organization is represented as internal customer of Supplying company code. DEFINE ORDER TYPES FOR INTERCOMPNY BILLING: Menu path: IMG/ SD/Billing/Intercompany Billing/Define Order Types for Intercompany billing Assign Organizational units by Plant: Menu Path: IMG/ SD/Billing/Intercompany Billing/Assign Organizational units by Plant. End customer: Customer who orders goods from the ordering company code. CONFIGURATION SETTINGS Assign Delivery Plant of the supplying company code to Sales Org + Distribution channel of the Ordering company code in the Enterprise Structure. PRICING: .

This pricing Procedure (RVAA01) is determined both at Sales Order level & Billing processing for the end customer. Condition records for PI01 are created Ordering sales Org + Supplying Plant + Material with the following key combination: Pricing Procedure ICAA01 is determined at Intercompany billing processing level. We maintain PR00 condition type to represent the ordering company code's price to the end customer. It is for information purposes only and does not have bearing on the value of the document. Eg: Sales Org. . 3. 2. Pricing Procedure ICAA01 has condition type IV01 that represents revenues for Supplying company code in the intercompany billing. end customer & the Material. of Ordering company code + End customer + Material. Pricing Procedure ICAA01 .Pricing Procedure for Inter Company billing is assigned to the combination of: Sales Area (of supplying company code) + Document pricing Procedure of Billing document type IV + Customer Pricing Procedure of the internal customer. PI01 represented under pricing procedure RVAA01 is reference condition type for IV01 and the same is defined in the condition type IV01. It is statistical condition type & meant for information purpose only. PR00 condition type also appears in Intercompany billing document. We assign Pricing procedure RVAA01 to combination of Sales area (Of Ordering company code) + Customer Pricing Procedure + Document Pricing Procedure of Sales document type. Condition records for PR00 are maintained using organizational elements of Ordering company code.We need to maintain two pricing procedures RVAA01 & ICAA01. 1. Pricing procedure RVAA01 represents condition type PR00 & any other discounts or surcharges that are meant for end customer. We also need to maintain PI01 condition type to represent costs to Ordering company code (in other words revenue to supplying company code). Due to this these two condition types represent same value.

4. The use of two different condition types in Intercompany billing is necessary to ensure that data is transmitted correctly to the financial statement (Component CO-PA). The condition type IV01 in intercompany billing document represents revenue to the Supplying Company. But its corresponding condition type PI01 in the billing document to the end customer is shown as a statistical item meant for information purposes. Condition Type VPRS in the intercompany-billing document indicates cost to the supplying company code. .

revenue for the supplying company). Subsequently. DELIVERY: Delivery is carried out from the supplying point & hence we can observe that it is done from shipping point assigned to the supplying plant. PI01 represents cost to ordering company (in other words. BILLING TO END CUSTOMER: . revenue for the ordering company). It is represented as statistical item only.ILLUSTRATION: STEP 1: Create Sales Order Manually Enter the Delivery Plant of the Supplying Company Code: OBSERVE CONDITIONS SCREEN FOR ITEM: PR00 represents Price to the end customer (in other words. Picking & PGI are carried out.

is assigned to Intercompany billing type IV. The system uses the EDI output type INVOIC in the FI variant. To ensure that payables are posted in financial accounts of the ordering company. the delivery company must be created as a vendor. which is then sent to the Payer. It serves as just an information item and is inactive. The automatic posting to the vendor account is initiated when output type RD04 is processed. If the ordering company enters the incoming invoice manually. the delivering company can print out an invoice document with the help of output type RD00. which includes this output type. VPRS condition type represents cost to the supplying company code. .T-Code: VF01 Create Intercompany Billing: T-code: VF01 OBSERVE THE CONDITIONS SCREEN OF THE INTERNAL INVOICE: IV01 Condition type represents revenue for the supplying company code. PR00 in intercompany billing document displays amount billed to the end customer. output determination procedure V40000. If automatic invoice receipt has been agreed. we must use the SD output control functions to ensure that output type RD04 is found in internal billing. In R/3 system.